UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 1-4433.
ARMATRON INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-1052250
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two Main Street
Melrose, Massachusetts 02176
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(617) 321-2300
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months, (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of Common Stock (par value $1) outstanding at January 31,
1997 is 2,459,749 shares.
<PAGE> 1
ARMATRON INTERNATIONAL, INC.
File No. 1-4433
----------------------------
PAGE(S)
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
-----------------------------
December 31, 1996 and 1995, September 30, 1996 3 - 4
Consolidated Condensed Statements of Operations for the three
months ended December 31, 1996 and 1995 5
Consolidated Condensed Statements of Cash Flows for the three
months ended December 31, 1996 and 1995 6
Notes to Consolidated Condensed Financial Statements 7 - 8
Item 2
------
Management's Discussion and Analysis of Financial Condition
and Results of Operations 9 - 11
PART II - OTHER INFORMATION
Item 4
------
Results of Votes of Security Holders 12
Item 6b
-------
Reports on Form 8-K 12
SIGNATURES 13
<PAGE> 2
ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Balance Sheets
December 31, 1996 and 1995, and September 30, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
December 31, September 30,
------------------ -------------
1996 1995 1996
------- ------- -------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,522 $ 1,180 $ 1,849
Trade accounts receivable,net 1,156 809 2,121
Inventories (Note 2) 2,513 2,483 2,349
Deferred Tax Asset 130 165 130
Prepaids & other current assets 335 228 187
--------------------------------
Total Current Assets 5,656 4,865 6,636
MACHINERY & EQUIPMENT, NET 610 865 637
OTHER ASSETS 107 108 202
--------------------------------
Total Assets $ 6,373 $ 5,838 $ 7,475
================================
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
<PAGE> 3
ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Balance Sheets
December 31, 1996 and 1995, and September 30, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
December 31, September 30,
------------------ -------------
1996 1995 1996
------- ------- -------------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES:
Accounts payable $ 875 $ 459 $ 1,171
Accrued liabilities (Note 3) 1,261 731 1,285
--------------------------------
Total Current Liabilities 2,136 1,190 2,456
--------------------------------
LONG-TERM DEBT (NOTE 4) 4,715 4,715 4,715
--------------------------------
DEFERRED RENT 71 --- 75
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share, 6,000,000 shares
authorized; shares issued at December 31, 1996 and
1995, and September 30, 1996, 2,606,481 shares 2,606 2,606 2,606
Paid-in capital 6,770 6,770 6,770
Accumulated deficit (9,539) (9,057) (8,761)
--------------------------------
(163) 319 615
Less:
Treasury stock at cost - 146,732 at December 31, 1996
and 1995 and September 30, 1996 386 386 386
--------------------------------
Total Stockholders' Equity (Deficiency) (549) (67) 229
--------------------------------
Total Liabilities & Stockholders' Equity $ 6,373 $ 5,838 $ 7,475
================================
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
<PAGE> 4
ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Statements of Operations
for the Three Months ended December 31, 1996 and 1995
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
December 31
----------------------
1996 1995
--------- ---------
<S> <C> <C>
Net Sales $ 1,215 $ 1,141
Cost of Products Sold 1,385 1,284
Selling, general and administrative expenses 508 556
Interest expense-related parties 120 120
Interest expense-third parties 7 2
Other (income) expense - net (27) (30)
----------------------
Net Loss $ 778 $ 791
======================
Per Share:
Net Loss $ .32 $ .32
======================
Weighted average number of common shares
outstanding 2,459,749 2,459,749
======================
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
<PAGE> 5
ARMATRON INTERNATIONAL, INC.
Consolidated Condensed Statements of Cash Flows
for the Three Months ended December 31, 1996 and 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
December 31,
------------------
1996 1995
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (778) $ (791)
Adjustments to reconcile net loss to net cash
flows from operating activities:
Depreciation and amortization 76 105
Loss on disposal of equipment (1) (1)
Changes in operating assets & liabilities 427 563
------------------
Net cash flow used for operating activities: (276) (124)
------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for machinery and equipment (51) (18)
------------------
Net cash flow used for investing activities: (51) (164)
------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash flow used for financing activities: - -
------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (327) (142)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,849 1,322
------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,522 $ 1,180
==================
SUPPLEMENTAL INFORMATION:
Interest paid - related parties $ - $ 41
Interest paid - third parties $ 7 $ 2
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
<PAGE> 6
ARMATRON INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements
1. OPINION OF MANAGEMENT
- ---------------------------
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (including normal
recurring adjustments) necessary to present fairly the consolidated
financial position as of December 31, 1996 and 1995, and September 30,
1996, and the consolidated statements of operations and cash flows for the
three months ended December 31, 1996 and 1995. These financial statements
should be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year
ended September 30, 1996. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
The year-end balance sheet data was derived from audited financial
statements, but does not include disclosures required by generally
accepted accounting principles. The accompanying unaudited, consolidated
condensed financial statements are not necessarily indicative of future
trends or the Company's operations for the entire year.
2. INVENTORIES
- -----------------
Inventories are stated on a first-in, first-out (FIFO) method at the lower
of cost or market.
Inventories consisted of the following:
<TABLE>
<CAPTION>
(In Thousands)
(Unaudited) (Audited)
December 31, September 30,
------------------ -------------
1996 1995 1996
------- ------- -------------
<S> <C> <C> <C>
Raw Materials $ 1,626 $ 1,549 $ 1,632
Work in Process 100 100 65
Finished Goods 787 834 652
--------------------------------
$ 2,513 $ 2,483 $ 2,349
================================
</TABLE>
3. ACCRUED LIABILITIES
- -------------------------
Accrued liabilities consist of the following as of:
<TABLE>
<CAPTION>
(In thousands)
(Unaudited) (Audited)
December 31, September 30,
------------------ -------------
1996 1995 1996
------- ------- -------------
<S> <C> <C> <C>
Salaries, commissions and benefits . . . . $ 328 $ 296 $ 365
Warranty costs . . . . . . . . . . . . . . 42 35 40
Advertising costs . . . . . . . . . . . . 129 170 145
Interest . . . . . . . . . . . . . . . . . 559 80 439
Other . . . . . . . . . . . . . . . . . . 203 150 296
--------------------------------
$ 1,261 $ 731 $ 1,285
================================
</TABLE>
<PAGE> 7
ARMATRON INTERNATIONAL, INC.
Notes to Consolidated Condensed Financial Statements
4. LONG-TERM DEBT
- --------------------
The Company has a $7,000,000 line of credit from a realty trust operated
for the benefit of the Company's principal shareholders. This line of
credit, with interest at 10%, requires monthly payments of interest only,
is payable in full in October 1997, and is collateralized by all assets of
the Company. The Company had $4,715,000 outstanding under this line of
credit at December 31, 1996.
5. NOTE PAYABLE
- ------------------
The Company has a $3,500,000 revolving line of credit from a commercial
finance company which expires in December 1999. This line of credit is
collateralized by all assets of the Company. The terms of this agreement
include a borrowing limit which fluctuates depending on the levels of
accounts receivable and inventory which collateralize the borrowings.
Interest on amounts outstanding is payable at 1 3/4% over the commercial
base rate. The commercial base rate was 8 1/4% at December 31, 1996. As of
December 31, 1996, the Company had outstanding letters of credit amounting
to approximately $564,000 under this credit agreement.
<PAGE> 8
ITEM 2:
Management's Discussion and Analysis of Financial Conditions
and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the three month period ended December 31, 1996, operating activities
consumed $276,000 in cash. The collection of trade accounts receivable generated
$465,000 and the decrease in trade accounts payable used $297,000. These were
offset by an increase in inventories of $164,000. Also, cash was consumed by a
net loss of $778,000.
The Company has a revolving line of credit from a commercial finance company
which provides aggregate borrowings of $3,500,000, and which expires in December
1999. Borrowings made against this line of credit are collateralized by all
assets of the Company. As of January 31, 1997, the Company was contingently
liable for outstanding letters of credit of approximately $582,000 under this
credit agreement.
The Company has a $7,000,000 line of credit from a realty trust operated for the
benefit of the Company's principal shareholders. This line of credit, with
interest payable at 10%, requires monthly payments of interest only, is payable
in full in October 1997, and is collateralized by all assets of the Company. The
Company had $4,715,000 outstanding under this line of credit on January 31,
1997.
The ratio of current assets to current liabilities was 2.7 at December 31, 1996,
as compared to 2.7 at September 30, 1996 and 4.1 at December 31, 1995. The ratio
of consolidated debt to consolidated net worth was (12.6) at December 31, 1996,
31.6 at September 30, 1996, and (88.1) at December 31, 1995.
Sales terms for the Industrial Products segment are 30 days net, and following
industry trade practice, the Consumer Products segment offers extended payment
terms for delivery of existing seasonal product items such as the Flowtron
electric leaf-eater, bugkiller, biomister, and compost bin, resulting in
fluctuating requirements for working capital.
The Company anticipates it will have less fluctuating requirements for working
capital for its new product items, the plastic Handy Hauler Yard Cart and
plastic Storemore Storage Shed, as these items are subject to less seasonal
fluctuations than the existing product lines.
The Company made an investment of $51,000 in capital expenditures in the first
quarter of fiscal year 1997. These expenditures were mainly for tooling and dies
used in production of the Company's Consumer Products. The Company anticipates
commitments of $416,000 for capital expenditures during the remaining quarters
of fiscal 1997.
The Company believes that its present working capital, lines of credit from a
commercial finance company and related party, and other sources of financing
will be sufficient to finance its seasonal borrowing needs, operations and
investment in capital expenditures in fiscal 1997.
<PAGE> 9
RESULTS OF OPERATIONS
The results of consolidated operations for the quarter ended December 31, 1996
resulted in net loss of $778,000, or $.32 per share, as compared with a net loss
of $791,000, or $.32 per share in the same period of the previous year. The
Company distributes its products primarily to major retailers throughout the
United States, with some products distributed under customer labels.
Substantially all of the Company's sales, as well as accounts receivable, relate
to business activities with such retailers. Sales increased $74,000 to
$1,215,000 for the three months ended December 31, 1996, as compared to
$1,141,000 for the corresponding period in the previous year.
The Company introduced its plastic Handy Hauler Yard Cart and Storemore Storage
Shed in fiscal 1995. These products are subject to less seasonal fluctuations
than the existing product lines. While we expect the decrease in consumer
product sales of our existing product lines to level off, we expect the increase
in consumer product sales of our new product lines to augment the sales of the
existing product lines.
Operating profit is the result of deducting operating expenses excluding
interest expense, general corporate expenses, and income taxes from total
revenue. Operations within the Consumer Products segment consist of the
manufacture and distribution of Flowtron leaf-eaters, bugkillers, biomisters,
compost bins, yard carts and storage sheds. Sales and operating losses for the
Consumer Products segment in the first quarter were approximately $1,182,000 and
$437,000, respectively, as compared to $1,127,000 and $419,000, respectively, in
the previous year.
The Company has experienced negative gross margins in the first quarter for the
past several years as product lines within the Consumer Products segment are
subject to seasonal fluctuations, with most shipments occurring in the third and
fourth quarters of the Company's fiscal year. Sales during the first quarter for
the past three years have not exceeded 10 percent of the annual sales volume.
The Company does not defer any period costs for absorption in subsequent
quarters.
The Industrial Products segment has introduced electronic obstacle avoidance
systems for automotive applications. Production began in January 1996. Sales and
operating losses for the Industrial Products segment in the first quarter were
approximately $33,000 and $84,000, respectively, as compared to $17,000 and
$80,000, respectively, in the previous year.
Gross margins were ($170,000) and ($143,000) for 1996 and 1995, respectively.
Selling, general and administrative expenses decreased $48,000 to $508,000 for
the quarter ended December 1996, when compared to the previous year.
<PAGE> 10
Interest expense for the first quarter was $127,000 as compared to $122,000 in
the prior year.
A tax benefit from the losses on operations for the three month periods ended
December 31, 1996 and 1995, was not reflected in the statement of consolidated
operations because the net operating losses could not be carried back to
previous years and future recognition was not certain.
<PAGE> 11
ARMATRON INTERNATIONAL, INC.
PART II
Item 4. Results of Votes of Security Holders
- ---------------------------------------------
The annual meeting of shareholders was held on January 16, 1997 in Melrose,
Massachusetts. Two proposals were submitted by shareholders as described in the
Company's Proxy Statement dated December 30, 1996 and were voted upon and
approved by shareholders at the meeting. The table below briefly describes the
proposals and results of the shareholder votes.
<TABLE>
<CAPTION>
Votes Votes
In Favor Opposed Abstain
--------- ------- -------
<S> <C> <C> <C>
Shareholder proposal to elect one director,
Elliot J. Englander 1,561,537 6,580
Shareholder proposal to ratify the selection of
independent auditors for the 1997 fiscal year 1,565,967 1,925 225
</TABLE>
Messrs. Charles J. Housman, Edward L. Housman and Craig Spangenberg are
Directors of the Company who continue to hold office.
Item 6b. Reports on Form 8-K
- ----------------------------
The Company did not file any reports on Form 8-K for the quarter ended December
31, 1996.
<PAGE> 12
ARMATRON INTERNATIONAL, INC.
File No. 1-4433
---------------
------------------------------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
ARMATRON INTERNATIONAL, INC.
-------------------------------------------
(Registrant)
Date: 2/10/97 /s/ Charles J. Housman
-------------------------- -------------------------------------------
Charles J. Housman, President and Treasurer
Date: 2/10/97 /s/ Richard M. Housman
-------------------------- -------------------------------------------
Richard M. Housman, Controller
<PAGE> 13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 1,522
<SECURITIES> 0
<RECEIVABLES> 1,346
<ALLOWANCES> (190)
<INVENTORY> 2,513
<CURRENT-ASSETS> 5,656
<PP&E> 6,130
<DEPRECIATION> 5,520
<TOTAL-ASSETS> 6,373
<CURRENT-LIABILITIES> 2,136
<BONDS> 4,715
0
0
<COMMON> 2,606
<OTHER-SE> (3,155)
<TOTAL-LIABILITY-AND-EQUITY> 6,373
<SALES> 1,215
<TOTAL-REVENUES> 1,215
<CGS> 1,385
<TOTAL-COSTS> 508
<OTHER-EXPENSES> (27)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 127
<INCOME-PRETAX> (778)
<INCOME-TAX> 0
<INCOME-CONTINUING> (778)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (778)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> (.32)
</TABLE>
